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Wednesday, April 27, 2011

The Ecosocialist Critique of Capitalism vs. Real World Socialism

It has been twenty years now since first glasnost and then the collapse of the USSR lifted the curtain on the appalling environmental record of Soviet socialism. Over that same 20 years, the burgeoning economy of socialist China has overtaken the United States as the world's largest emitter of greenhouse gasses. Still, it remains common to hear capitalism singled out as the greatest environmental threat to our planet, and socialism as its salvation.
A forceful statement of the environmentalist case against capitalism can be found in the Belem Ecosocialist Declaration, the product of a conference held in Paris in 2007. That document sets out a simple chain of cause and effect: Capitalism requires profit, profit requires growth, and growth means environmental destruction. Here are some excerpts:

Humanity today faces a stark choice: ecosocialism or barbarism. . . .We need no more proof of the barbarity of capitalism, the parasitical system that exploits humanity and nature alike. Its sole motor is the imperative toward profit and thus the need for constant growth. . . . Capitalism’s need for growth exists on every level, from the individual enterprise to the system as a whole. The insatiable hunger of corporations is facilitated by imperialist expansion in search of ever greater access to natural resources . . . . The capitalist economic system cannot tolerate limits on growth; its constant need to expand will subvert any limits that might be imposed . . . because to do so would require setting limits upon accumulation – an unacceptable option for a system predicated upon the rule: Grow or Die!

To be right up front about it, the critique is not all wrong. There is a “Drill, Baby, Drill!” version of capitalism with a throughput mentality and a contempt for environmental values that provide fodder for the ecosocialist critique. Clearly, neither neither capitalism nor socialism has a monopoly either on environmental sin or environmental virtue. Reaching a considered judgement about their relative economic impacts requires asking two questions:

Which has been more environmentally destructive in practice, capitalism or socialism?

Which system, capitalism or socialism, is more receptive to the changes that need to be made to achieve long-run environmental sustainability?

It had long been evident, to anyone who cared to look, that the world’s preeminent experiment in socialism, the Soviet Union, had serious environmental problems. As early as 1972, many of them were detailed by Marshall Goldman in Spoils of Progress. Peresroika in the 1990s and, finally, the collapse of the Soviet Union, made access to information easier for authors like Murray Feshbach and Alfred Friendly, Jr., who provided a thorough survey in Ecocide in the USSR. Here are some of the most prominent problems featured in these and other sources:

Pollution of Lake Baikal, the world’s oldest, deepest, and once cleanest body of fresh water, caused by paper mills and other industries that dumped untreated waste into the lake.

The near-disappearance of the once-vast Aral Sea, which dried up due to diversion of water for irrigation, leaving behind salt deserts poisoned by agricultural chemicals.

The 1986 Chernobyl nuclear disaster, the world’s worst, caused not just by operating errors but by a reckless design that provided no containment vessel in case of accident. The nuclear accident that had been considered the world’s worst up to that time also occurred in the Soviet Union, the 1957 explosion of a waste storage pond at the Mayak nuclear weapons complex.

Disastrous peat fires in the Moscow region, a legacy of ill-conceived Soviet projects for draining the local wetlands.

Enormous emissions of greenhouse gasses, due to heavy reliance on coal and far lower energy efficiency than capitalist economies.

High levels of air pollution in major cities, caused by factories sited close to populated areas and operating with minimal if any pollution controls.

Destructive farm and forestry practices, leading to widespread erosion and habitat loss.

China, the world’s other big socialist economy, also has its long list of environmental sins. Due in large part to intensive use of coal, it has recently taken the world lead in greenhouse gas emissions, despite an economy half the absolute size the United States. In air quality, it is home to 16 of the world’s 20 most polluted cities. Water pollution is a pervasive national disaster. Its leadership in production of rare earth metals was achieved largely due to illegal pirate mining that caused intense heavy metal pollution and local health disasters. An increasing percentage of pollutants, from mercury to soot, that are deposited in the western United States are being traced all the way to China.

To their credit, ecosocialist documents like the Belem Declaration direct at least token criticism at what they call “productivist" socialism. The ecosocialists are on to something, although not perhaps quite what they think, when they introduce this concept.

The adjective productivist, as applied to an economy, appears to mean one that concentrates on maximizing output without paying sufficient attention to the costs of inputs. By “costs of inputs,” of course, I mean what economists call opportunity costs, that is, costs as measured in terms of the value of alternative uses for the same resources. The opportunity costs of industrial production include both the costs of depletion of nonrenewable resources (lost opportunities to use the same resources for some other purpose in the future) and external costs (for example, the lost opportunities to use or enjoy property damaged by pollution).

If we understand the term in this way, then it can identify not only a productivist variant of socialism, but also a productivist variant of capitalism. The “affordable energy” lobby in the United States is an example of productivist capitalism in action. Affordable energy is a favorite slogan of the American Petroleum Institute, as used, for example, in this comment by API President Jack Gerard: “A ban on offshore drilling will hurt growth “by undercutting our nation's access to affordable, reliable, domestic sources of oil and natural gas.”

The affordable energy lobby worries about attempts to force oil companies to raise the price at the pump by enough to cover external costs of petroleum production and use. In the case at hand, Gerard was concerned about regulations aimed at ensuring that oil companies bore the cost of oil spills and of the precautions needed to avoid them. At other times, the same affordable energy argument has been directed at regulations intended to control air pollution, both on a local level and in the form of global climate change.

The fact is, businesses seek profit, and they tend to go after any and all profit opportunities. We cheer when entrepreneurs increase profits by improving products or reducing production costs. However, profits can also be boosted by lobbying the government to restrict the activities of competitors, and, equally, by lobbying for laws that allow a company to shift part of its costs of production to unwilling third parties. OK, so you don’t want to call those profits? I agree. Economists call them “rents,” but that term is too wonky for many people. Ayn Rand had a better term: Loot. Polluters are looters.

Let’s come back now to the ecosocialist critique. What it really comes down to is less a critique of capitalism than of productivism. The question we have to ask is, which system, capitalism or socialism, is more susceptible to productivist tendencies? I think the answer is socialism, although capitalism is by no means immune.

The first reason that socialism is more likely to develop environmentally damaging productivist tendencies is that economic incentives do not work very well under socialism. In a capitalist society, the number one objective of environmental policy is to ensure that externalities are fully recognized in market prices. If the price of gasoline at the pump fully reflects the opportunity costs of pollution and resource depletion, drivers, regardless of their personal environmental sensitivities, will be forced to think about driving less or buying a more efficient vehicle. The same principle applies to users of industrial energy, whether they be plastics makers, farmers, or power plants. I don’t mean to underestimate the difficulty of getting the legislature of a democratic capitalist country to pass laws that protect property rights to the needed degree. But when the price system is used to fight pollution, it seems to work. For example, in the United States of the 1990s and early 2000s, a system of tradable permits was used with great success to bring down sulfur dioxide emissions from coal-burning power plants, with the result that the intensity of acid rain in the eastern part of the country was cut by half.

Under socialism, economic incentives to fight pollution do not work well. Yes, I know, there is such a theoretical construct as “market socialism.” Under that hypothetical system, advocated by 20th century writers like Oskar Lange and Abba Lerner, managers of collectively owned firms guide their production activities in accordance not with true market prices set by supply and demand, but instead by following “shadow prices” that are set by government planners at a level supposedly equal to opportunity costs. In theory, there would be no reason why the shadow prices could not include appropriate adjustments for environmental impacts. I don’t want to reargue the whole market socialism debate here. The concept has been widely judged to be impractical, and as far as I know, it has no living proponents. I think Ludwig von Mises said it all when he suggested that a real market is to market socialism as a real railroad is to a boy playing with toy trains. So we can drop market socialism, and look at socialism in the real world.

In the Soviet Union, as Goldman pointed out, both law and ideology provided for a degree of environmental protection. To at least a small degree, these protections were backed up by economic sanctions against polluters. The problem, however, was that industrial managers were not just insensitive economic incentives for protection of the environment, but to any kind of economic incentive at all. The Soviet system did not just encourage environmental waste, it was wasteful in every conceivable way. It wasted labor, capital, energy, natural resources, cement, steel, coal, tractors, fertilizer, wood, water—it wasted everything. Why? Because there was no profit motive.
Today, some people worry that big banks like Goldman Sachs do not operate efficiently because they know the government will bail them out if they make a loss. We call this "privatizing the gains, socializing the losses.” Well, the Soviet economy was a system in which every enterprise was a Goldman Sachs. No wonder it collapsed.

Now for the second reason why socialism tends to be more productivist than capitalism, which has to do with social attitudes that arise when there are no property rights. Where there are property rights, there is always an owner to resist trespass, whether by people on foot or noxious chemicals wafting through the air. True, the legal system doesn’t work perfectly. Sometimes owners can’t adequately protect their rights, but the rights are there. Furthermore, where there is widespread ownership of at least small scraps of property, respect for the property rights of others also becomes widespread, although, alas, not universal.

But wait, the ecosocialist might say, under socialism there are collective property rights and respect for the property of society as a whole. Really? Let me tell a story.

At the business school my wife and I used to run in Moscow, the students put on an annual May picnic. After some advance scouting by the class president, the entire student body and faculty would jump on the electric commuter train. A few stops outside the city, we would jump off and head into the woods for a nice picnic. Whose woods? Some ministry’s or institute’s or collective farm’s, no one ever seemed to know exactly. A picnic needed a campfire, of course, so someone would bring an ax and cut down the nearest sapling to make a fire. When cleanup time came, the students followed their standard practice, which was to toss all the beer cans and vodka bottles into the remnants of the campfire, where they would become broken, charred, and harder to pick up in the (unlikely) event that someone were to try doing so later. When we suggested bringing our own fuel or packing out our garbage, we were met by looks that suggested that such things had never been thought of before.

I started asking friends and colleagues about all this. Why didn’t the socialist property owner care who picnicked there? Why didn’t kids learn to respect socialist property, and clean up after themselves? The answer was that people didn’t think of those woods as socialist property, even though nominally, they were. Instead, they were seen as nich’ia sobstvennost—“no one’s property.” As such, no one took responsibility for them, and no one felt bad about abusing them. Extend the same attitude to Lake Baikal, the Aral Sea, and the Chernobyl nuclear station, and what you get is Ecocide in the USSR.

The third reason that socialism tends to be more productivist than capitalism stems from political economy. Private property provides political power bases to multiple interest groups. Sometimes that can work against the environment, as when Appalachian coal unions and mine owners join to lobby against restrictions on sulfur dioxide emissions. At the same time, though, producers of low-sulfur coal from Western states can lobby on the other side, achieving some kind of balance. Furthermore, not-for-profit groups like the Nature Conservancy can use the mechanisms of private property to protect critical habitat, and private ownership sustains an independent voice for media that can publicize environmental causes. Even ecosocialists enjoy the protection of private property for their web sites and conferences.

In a socialist system, producers have a stronger grip on the levers of political power. After all, as state enterprises, they are not mere lobbyists—they are themselves a part of the government structure. For example, Goldman noted that there were protests in the Soviet Union when paper mills first started dumping waste into Lake Baikal. However, the protesters themselves were always one government institution, say, the Limnological Institute of the Academy of Sciences, working against another, in that case the Ministry of Timber, Paper, and Woodworking. Sometimes the protesters were able to exploit personal rivalries within the government in order to plant articles in government newspapers, but in the end, they always lost. The whole incentive system of the Soviet economy, from the Politburo down to the local plant manager, was focused on just one thing: meeting the impossibly demanding production targets of the Five Year Plan. The environment always lost.

Once again, let me emphasize that private property and a market economy may be necessary conditions for protection of the environment, but they are not sufficient conditions. The sad story of environmental protection in post-Soviet Russia is a case in point. Socialism no longer reigns in Russia, but the variant of capitalism that has replaced it is no less productivist. Civil society is weak. Green protesters still struggle to get publicity for their causes in a largely state-controlled press. It is no longer casual picnickers who chop down the saplings in Moscow’s green belt, but instead, billionaire oligarchs who fence off whole swathes of protected habitat for their sprawling dachas. Oil is king, and a blind eye is turned to spills on land or at sea. BP, chased from the Gulf of Mexico with its tail between its legs, is getting ready to drill for oil among the drifting icebergs off Russia’s northern coast. The last wild Siberian tiger may soon fall to a shot from the helicopter of an oligarch or government minister out for a weekend’s “sport.”

Are things better in China, where private industry has made huge inroads into the still nominally socialist economy? Now and then there are a few hopeful signs. This year has seen a belated campaign to shut down some of the worst pirate rare-earth mines in favor of better-run government ventures. China has become a leader in alternative energy, although its efforts may reflect an opportunistic effort to corner the world market for windmills and solar panels more than a genuine concern for the planet. Meanwhile, urban air pollution remains so bad that the Olympics could be staged in Beijing only by shutting down most local industry for the duration. I sit here in my house in Washington State wondering how much Chinese mercury is coming down from the rainclouds that drift in across the Pacific. But at least I won’t have to get the approval of a socialist censor to post this essay to my blog.

This post is an excerpt from the forthcoming 40th anniversary edition of my 1971 book, TANSTAAFL: The Economic Strategy for Environmental Crisis." Watch for it later later this year.

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